Why Multifamily?

Multifamily Real Estate Investing is a “Feel Good” Business

At Cornerstone Community Partners, our motto is “enhancing community creates opportunity.” Each time we purchase and renovate a large multifamily complex, we transform an entire neighborhood all at once. All of our tenants get to enjoy the improvements we make in a short period of time after takeover. We re-mediate deferred maintenance, refresh and enliven community spaces, add or improve amenities, upgrade vacant unit interiors to attract quality neighbors and host gatherings to build a sense of community through fellowship among neighbors. Happy tenants pay their rent, renew their leases and refer their friends.

Multifamily Assets are Businesses, not Houses

While multifamily complexes seem similar to their single-family counterparts, the major difference between the two is in the valuation. Multifamily assets are bought and sold as a business, not a property. While a single-family house is limited to the appreciation of the entire neighborhood, a multifamily complex appreciates by increasing the Net Operating Income. The “passive appreciation” of single-family residences limits the investor’s control.

Multifamily investors have the advantage of “forced appreciation” by increasing income while decreasing expenses. As we implement our business plan to improve the property, we can gradually increase rents in order to increase income. Small increases among 100 or 150 or 200 units produces massive increases in the value of the property. At the same time, we work to build efficient processes and oversight to reduce expenses. Our business plan is to sell in 4-7 years in order to capture the appreciation at a favorable point in the market cycle.

Principle Protection

To limit the potential liability caused by unexpected catastrophe, each of our assets covered by hazard insurance which protects from not only catastrophic loss but also covers the loss of income the property generates if disaster hits. To limit the potential liability caused by a downturn in the market cycle, we stress test our underwriting to evaluate the sustainability of the asset in a down market

Cash Flow

Each time a tenant vacates a single-family residence, the vacancy rate spikes to 100%. In a 100-unit apartment complex, the same one tenant moving out causes only a 1% vacancy increase. Consistent, predictable occupancy rates are one reason that multifamily assets cash flow more predictably than single-family assets.

Multifamily assets benefit from favorable lending terms, as well. Banks finance up to 75% of the appraisal, up to 75% of the rehab costs and offer interest-only payback periods from 1 to 5 years. This leverage allows for increased cash flow on the front end and better returns at the time of sale.

Our team works hard to maximize rental income, find opportunities for other income (such as a laundry facility or paid covered parking), and minimize expenses. The margin between income and expenses is returned to investors quarterly as passive cash flow. Mailbox money!

Economies of Scale - 1 purchase, 100+ units

Managing 100+ units in one location offers efficiencies unmatched in single-family investing. Which is easier: managing 100 single-family homes spread out across an entire city or 100multifamily units in one complex? The size of each property allows us to put together a solid sponsorship team and hire a 3rd party professional management company with experienced leasing agents and maintenance staff. They know the market, the competition and how to offer exceptional customer service to the tenants. They have extensive experience with multifamily rehab projects and can secure discounts on bulk building materials. When we need an outside contractor, they connect us with reliable lawn care, attentive cleaning services and efficient plumbers and electricians.

Tax Benefits

We partner with the government to offer safe, clean, well maintained, affordable housing and in return the government offers tax benefits to our investors. Due to cost segregation and bonus depreciation, multifamily investments have higher after-tax yields due to a shorter depreciation schedule. Upon sale, profit over depreciated basis is mostly taxed at the capital gains rates, which are lower than ordinary tax rates.